“c01AnIntroductionToMicroeconomics_PrintPDF” — 2022/7/19 — 7:26 — page 72 — #70
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f. Identify and explain two policies the government could use to help overcome the free rider problem. (4 marks) g. Government subsidies can be used to reduce some types of market failure. i. Define government subsidy. (1 mark) ii. Explain how subsidies paid to Australia’s sugar growers or suppliers to leave the industry would alter the allocation of resources that would otherwise occur in a market economy. Illustrate the impact of this type of subsidy, using a hypothetical demand–supply diagram for the sugar market, to show the before and after effects of the payment. (3 marks) h. Under Australian law, ingredients must be listed on the packaging of processed foods. Explain how this might help reduce market failure associated with the consumption of these goods. (2 marks) i. Outline the type of market failure that may be associated with online dating sites. (2 marks) j. Explain why the government provides free vaccinations to school children and some older citizens. (2 marks) k. The federal government currently pays a tax rebate of up to 30 per cent for those individuals taking out or buying private health insurance. This is because it helps to correct market failure, improve resource allocation towards socially desirable goods and services, eases pressures on public hospitals and ultimately improves government finances. With the help of a fully labelled demand–supply diagram, explain how this action by the government might help to correct market failure. (3 marks) l. The government applies various policies to help reduce market failure. Use small, fully labelled D–S diagrams, each representing a particular market, to illustrate hypothetically, the impact of various government policies listed below, on market demand, supply, price, quantity traded and the allocation of resources. Show the market before and after the change in government policy. (6 marks) ii. Lifting the legal age for the purchase of alcohol to 21 years on the market for alcohol
iii. The government allowing the merger of the two largest oil companies
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i. The removal of tariffs on imported cars on the local car market
v. Applying a tax on foreign buyers of Australian property on our property market
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iv. The introduction a tax on firms generating electricity using brown coal, and the effects on the electricity market, the market for brown coal and the market for renewable energy sources
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Solutions and sample responses are available online.
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Key Concepts VCE Economics 2 Units 3 & 4 Eleventh Edition
vi. Freight subsidies paid to Tasmanian fruit growers, on the market for apples in other states
